Indiana House of Representatives Strips Cigar Tax Cap from Bill, Heads Back to Senate (Update)

Correction: This article initially reported that the cigar tax cap had been included in the bill passed by the House. However, it was stripped from the bill prior to passage. We regret the error in our coverage.

A bill that had contained a cap on the cigar tax moving through the Indiana Legislature took another significant step forward today, as the House of Representatives passed SB 382 by a vote of 60-37. However, the cigar tax cap was stripped from the bill during a committee hearing.

The bill was introduced by Sen. Travis Holdman, R-Markle, primarily to bring parity to the various tobacco and nicotine product tax rates in the state. In particular, it seeks to address the fairly new taxes on the various types of e-cigarettes and e-liquids, which was put into place during the 2021 legislative session.

But is also contained a provision that would benefit premium cigar smokers, as it would have implemented a 72-cent per cigar cap on the state’s tax rate of 24 percent of the wholesale price. In the case of a cigar with an MSRP of $9.50, the price at the register would drop from $11.78 to $10.94, by halfwheel estimates, and before any sales or other taxes are added.

Cigars with a wholesale price under $3 would have still been taxed at the 24 percent rate.

The bill was passed by the Indiana Senate on Feb. 1 by a 37-12 vote. It now heads back to the Senate with amendments for the two chambers to rectify; if they get resolved, the bill will then head to Gov. Eric Holcomb for his signature. Should it be signed into law, the cap would go into effect on Jan. 1, 2023.